The current situation of steel import activities of hong nam mechanical join stock company

Besides, the domestic steel industry has not been able to producespecific types of steel for the mechanical industry with reasonable prices andgood quality such as alloy steel, hot rolle

1 Background

In the XXI century, the international economic integration trend has beentaking place at a rapid rate in the ASEAN region as well as worldwide.Countries all over the world have a strong connection with each other invarious aspects, especially in economics and trade

After than more 30 years of international economic integration, Viet Namrecognized the importance of the import-export industry and the mechanicalindustry for the country’s development On the path of industrialization andmodernization of the country, the Government identified the mechanicalindustry as the backbone for Vietnam’s economic development Therefore,the Government has supported and created favorable conditions for domesticmechanical enterprises to concentrate on producing mechanical products thatserve the processing industry; agriculture, forestry and fishery Although steel

is one of the main raw materials for the mechanical industry’s production,

domestic steel produced, cannot meet the demand of Vietnamese mechanicalenterprises Besides, the domestic steel industry has not been able to producespecific types of steel for the mechanical industry with reasonable prices andgood quality such as alloy steel, hot rolled steel plates, cold-rolled steel plates,

… that are important materials used for mechanical manufacturing Therefore,steel imports play an important role in the development of the domestic mechanicalindustry

The Chinese steel market is one of best choices for Vietnamese mechanicalenterprises because of abundant steel supply, diverse types of steel as well asreasonable prices However, there are a lots of steel markets such as Taiwan,

Russia, Singapore, … that also provide the types of steel with high quality and

good prices Therefore, Vietnamese mechanical companies have to research

carefully to find out the suitable market for their company, which helps the

companies cut down raw material costs and also focus investment on the hightechnology machineries to produce high-quality mechanical products In the

context of Vietnam’s global integration, Hong Nam Mechanical Joint StockCompany recognized both opportunities and challenges of importing steelfrom different markets

Hong Nam Mechanical Joint Stock Company is known as the first companycapable of designing and manufacturing mechanical products for different types

of industries across the country Therefore, the company always need to importlarge quantities of steel for production After an internship in General SalesDepartment, Hong Nam Mechanical Joint Stock Company, along with

the school’s knowledge to learn more about the company’s steel import

situation, I chose the topic: “The current situation of steel import activities

of Hong Nam Mechanical Join Stock Company.” for internship report

The purpose of the internship report is to analyze the company’s steelimports activities to find out achieved aspects and also limited problems in thecompany’s imports Thereby, there are some proposed solutions to enhancethe efficiency of the company’s steel imports activities

· Analyzing key information of the company

· Researching the steel import activities from different markets of the company

in order to find out limited problems

· From results, propose suitable solutions to enhance the steel import activities ofthe company.

- Data Analysis: Base on two data sources (Primary data and Secondary data) to research and find out problems

6 Research Structure

The internship report structure except for introduction, conclusion, contents

and references, has been divided to 3 chapters:

CHAPTER 1 INTRODUCTION TO HONG NAM MECHANICAL JOINT STOCK COMPANY

CHAPTER 2 THE CURRENT SITUATION OF THE STEEL IMPORT

ACTIVITIES OF THE COMPANY

CHAPTER 3 RECOMMENDATIONS AND SOLUTIONS

CHAPTER 1 INTRODUCTION TO HONG NAM MECHANICAL

JOINT STOCK COMPANY 1.1 Establishment and development process

Hong Nam Mechanical Joint Stock Company is a state-owned enterpriseestablished on November 4, 1971 under the Decision No 2445/ CLCV of theMinistry of Mechanics and Metallurgy (now the Ministry of Industry)

In December 2003, the company was equitized according to Decision No.238/ 2003/ QD-BCN of the Ministry of Industry

Figure 1.1 Logo of Hong Nam Mechanical Joint Stock Company

· Company’s name: HONGNAM MECHANICAL JOINT STOCK

Hong Nam Mechanical Joint Stock Company (HOMECO) is known as one

of the first Vietnam enterprises that can design, manufacture and supplytransport lifting equipment such as crane, gate crane, conveyor belt, screw,elevators, hoists, … At the same time, the company also manufacture uniquemechanical products for different types of industries in Vietnam like installingsteel structures for warehouse frame, scaffolding, and other mechanicalproducts

The company has the infrastructure including factories, auxiliary areas withhigh standards to manufacture lifting equipment, mechanical process and steelstructure Besides, the company is equipped with state of the art equipmentsuch as lathes, horizontal boring machines, internal – external high precisioncircular grinding machines, planers of all kinds, high frequency furnaces,automatic steel plates cutting, US automatic welding machine, DC weldingmachine, mechanical testing machine for fabrication materials, steel structureoscilloscope, detector check the quality of welds, pneumatic sandblastingmachine, modern paint praying system, theodolite, … with Vietnamesestandards TCVN4244-2005

After equitization, the company has brought the ISO 9001-2008 qualitymanagement system into the manufacturing process, which helps the companyimprove management ability Also, the company has a team of specializedtechnical staffs with high qualifications

Over the past 40 years, the company has been constantly growing, alwayssuccessfully fulfilling its assigned tasks and also have been awarded manyLabor Medals, the certificates of merit from Ministry of Industry

1.2 Branch Offices of Hong Nam Mechanical Joint Stock Company

HOMECO currently has 5 branches nationwide

· HOMECO Ho Chi Minh Branch (Tax ID: 0101495214-005) 5

· HOMECO Bac Ninh (Tax ID: 0101495214-001).

· General Service Center – HOMECO Branch (Tax ID: 0101495214-004)

· Ha Noi Crane Mechanical Factory – HOMECO Branch (Tax ID: 003)

0101495214-· Lifting Equipment Factory – HOMECO Branch (Tax ID: 0101494214-002)

1.3 Business activities of HOMECO

1.3.1 Business activities

- Manufacture of lifting and handling equipment

- Installation of industrial equipment systems in the construction industry and civil construction

- Design, manufacture, repair and installation of lifting equipment, non-standardequipment and equipment for construction industry and civil construction

1.3.2 Products and Services

- Lifting equipment: suspension bridge crane, single girder bridge crane, double girder bridge crane, container gantry crane, car winch, grabbing crane

- Conveyor

- Hydro-mechanical equipment: valve gate of hydraulic engineering

constructions

- Smart parking: smart car garage, smart multi-story garage

- Solar power panels

- Mechanical process service: burning tower crane

- Repair and maintenance services

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1.4 Management organization of HOMECO

Sales & Production & Purchasing & HOMECO Ho

Figure 1.2 The scheme of HOMECO's management organization

(Source: HOMECO’s Internal Documents)

- Making policies and strategic objectives of the company.

- Be responsible for the foreign affairs of the company

- Signing directly economic contracts

- Deciding financial indicators, signing payment orders, issuing payment orders and checks

- Deciding on salaries and allowances (if any) for employees in the company

- Appointing, dismissing and removing manager positions in the company

- Monitoring all activities of company’s departments

b, Deputy Business Development Director

Mrs Phan Thi Tuoi

Main responsibilities

- Monitoring all activities of departments (Sales & Marketing Department,Accounting Department, Administration Department and Purchasing & Import-ExportDepartment)

- Planning, budgeting for marketing activities for each quarter of each year to advise General Director

- Advising for General Director on the management of capital in the company

- Checking the financial statement made by the Accounting Department.

- Signing economic contracts as authorized by General Director and approving anumber of documents related to production activities in the company as authorized byDirector

- Developing policies such as wages, social policies and other policies for

employees

c, Deputy Technical Director

Mr Nguyen Dinh Quang

Main responsibilities

- Monitoring all activities of departments (Production & Technical Department, Purchasing & Import-Export Department)

- Be responsibilities for manufacturing activities

- Annually, building recruitment plans, training and managing human resources to meet requirements of production

- Managing the quality of mechanical products

- Supervising and approving the purchase materials for production activities

1.4.2 Sales & Marketing Department

Manager: Mrs Nguyen Thi Lien

- Cooperating with Production & Technical Department to providing the specific information of company’s mechanical products.

- Taking care of customers and solving customers’ requirements (if any)

- Researching the company’s products and comparing with other companies

1.4.3 Accounting Department

Manager: Mrs Nguyen Thi Lan Phuong

Numbers of employees: 5

Main responsibilities

- Taking responsibility for important tasks: management of company’s cash

flow, budgets and forecasting, management of taxes, management of companyinvestment, financial reporting and analysis

- Supporting Purchasing & Import-Export Department to pay sales contracts using L/C or T/T

1.4.4 Administration Department

Manager: Mrs Nguyen Thi Thuy

Number of employees: 4

Main responsibilities

- Arranging appointments and scheduling important events of company

- Storing and maintaining employees’ personal records

- Making monthly expenses reports submit to financial – accounting department

- Storing and printing documents of company when there are important events or meetings

- Updating policies and ensuring that all employees abide by the rules of

company

1.4.5 Production & Technical Department

Manager: Mr Nguyen Van Thanh

- Supporting Sales & Marketing Department to advise customers

1.4.6 Purchasing & Import-Export Department

Manager: Mrs Nguyen Thi Hanh

Number of employees: 10

Main responsibilities

Purchasing & Import-Export Department has divided two main teams:

- Team 1: includes purchasing staffs that are responsible for cooperating withProduction & Technical Department to checking inventory; collecting data about themarkets to find out suitable markets for importing materials of company; makingpurchasing plan to submit to Deputy Technical Director and Deputy BusinessDevelopment Director

- Team 2: includes documents staffs, customs declaration staffs that takes

responsibilities for handling sales contracts: checking and preparing a set of

import-export documents, registering customs declarations for import cargoes,

submit necessary documents for payment: B/L, sales contracts, … to

Accounting Department to pay the imported cargoes

1.4.7 Branch Offices and Factories

- Branch Offices in Ho Chi Minh and Bac Ninh: Carry out all activities of

HOMECO

- Factories in Ha Noi and Bac Ninh are responsible for manufacturing mechanical

products under the requirements of the company

- General Services Center: maintaining the machineries of the company and

mechanical products of customers

1.5 The situation of production and business of the company from 2017 –

3 Gross Profit 37, 683,108,789 31,207,679,374 31,229,794,724

4 Revenue from 349,053,370 501,856,662 497,588,204financing

activity

Expenses

7 Selling 7,409,342,598 1,122,898,341 16,686,720,631expenses

8 General 20,272,590,367 18,810,524,052

administration

expenses

9 Net profit 10,262,153,327 13,963,869,668 11,951,156,566 from

expense

15 Deferred corporate tax expense

15 Profit after 10,857,281,494 11,146,652,988 10,117,250,649

corporate tax

(Source: Accounting Department)

The table provides information about the business result of HOMECO over

the period of 3 years As can be seen from the table, HOMECO witnessed an

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increase in net revenue of the company in 3 years Net revenue of the

company increased from 168,42 billion VND in 2017 to 180,8 billion VND in

2018 and reached over 211 billion VND in 2019

Net Revenue Costs of goods sold Net profit from operating activities

Figure 1.2 Revenue, Costs of goods sold and Net Profit from operating

activities of HOMECO from 2017 to 2019

The chart illustrates the figure for revenue, costs of goods sold and net

profit of the company from 2017 to 2019 It is clear seen from the chart that

there was a rise in all three indicators of the company In 2017, the figure for

cost of goods sold was 130,74 billion VND and slightly increased to over 149

billion VND in 2018 and about 180 billion VND in 2019 Overall, the figure

for net revenue was 33 billion VND higher than that of costs of goods sold

from 2017 to 2019 Besides, the net profit from operating activities tended to

grow over the years In 2017, the figure for net profit was about 10 billion

VND, was 3 billion VND lower than that of net profit in 2018 Until 2019, the

net profit of the company slightly decreased, which was nearly 12 billion

VND

From the chart, there was no much change in all three indicators There are

a number of reasons to explain this trend The first reason is that the company always concentrates on researching markets to find materials with reasonable prices and high quality, which helps the company cut down the cost materials for manufacturing The second reason why the net revenue of the company gradually increased over the years is that before choosing mechanical product

to produce, the company tested and researched markets to find the suitable mechanical products Last but not least, the company also realizes that

marketing plays an important in increasing revenue Therefore, HOMECO rose the selling expenses to boost the net revenue of the company

CHAPTER 2 THE CURRENT SITUATION OF THE STEEL IMPORT

ACTIVITIES OF THE COMPANY 2.1 The steel import situation of HOMECO from 2017 – 2019

2.1.1 Import form of the company

Import form of the company is direct import that means the companydirectly deals and does business with partners and does not have to mediate.Because the company imports steel for its production, the direct import helpsthe company take the initiative in controlling the amount of steel in thewarehouse, finding a reasonable source of steel to reduce input costs ofmanufacturing

When importing by this method, the company must do by itself such as:researching domestic and foreign markets, calculating costs, and complyingwith national and international legal policies

2.1.2 Steel import process of the company

Making import plans

Negotiating and Signing contracts

Performing Contracts

Liquidation

Figure 2.1 HOMECO's steel import process

(Source: Purchasing & Import-Export Department)

2.1.2.1 Making import plans

v Implementation department: Purchasing & Import-Export Department

HOMECO's steel import plan includes basic information such as: Checkingsteel inventories; the situation of steel market and suppliers; forecastingmarket fluctuations to determine the time of steel import; setting goals,specific action measures; evaluating preliminary effectiveness

To make a steel import plan, the following steps should be taken:

· Step 1: Coordinating with the Production & Technical Department to checkthe amount of steel in stock, which is one of conditions to decide the amount of importsteel

· Step 2: Assessing overview of the steel market and suppliers Then,analyzing the difficulties and advantages of importing steel from different suppliers indifferent markets

· Step 3: Selecting types of steel that matching the company's production and business objectives

· Step 4: Setting specific goals with clear data: How many types of steel will

be imported? At what prices? Which markets will the company import steel? and fromwhich suppliers?

· Step 5: Proposing implementation measures

· Step 6: Evaluating preliminary economic efficiency of steel imports through the calculation of indicators

After that, the head of the department summarizes and reports to DeputyTechnical Director who reports to Board of Directors for approval and importdecision making

2.1.2.2 Negotiating and Signing contracts

v Implementation department: Deputy Technical Director or Deputy BusinessDevelopment Director.

After the import plan was approved by the Board of Directors, the companychose suitable markets and partners Deputy Technical Director or DeputyBusiness Development Director represents for the company to negotiate withpartners on issues related to goods: price, quality, delivery time, Withtraditional partners, the negotiation process is usually carried out by fax, telex.With new partners, the company will meet face-to-face to negotiate

After the negotiation is over, the two parties agree and decide to sign acontract The ordinary contract has been prepared by the partners with terms ofgoods (commodity, quality, quantity, price), shipment term, payment term,penalty, claim, … After reviewing the contract in accordance with the request,the two parties sign the contract and are responsible for fulfilling theobligations in this contract

2.1.2.3 Performing contracts

v Import license (if any)

According to Circular No 14/2017 / TT-BCT of the Minister of Industry andTrade, from September 1, 2017 steel importers do not need to apply forautomatic import license

Implementation department: Accounting Department

Depending on the value of the cargoes and the negotiation process withpartners, the company will choose the suitable payment method Normally,thecompany use two payment method: T/T payment method and L/C paymentmethod